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Luxury goods market going strong amid global woes

Upscale brands have continued to report strong regional sales in the Middle East

By Elizabeth Broomhall

Wed 02 Nov 2011 10:35 AM

Luxury buyers in the Middle East have shown no signs of tightening their purse strings despite the looming threat of a second financial crisis, analysts told Arabian Business.

Upscale brands have continued to report strong regional sales amid a global economic slowdown, as wealthy consumers drive a surge in demand.

“Luxury around the world continues to perform well, but I think this region is special,” said David Macadam, regional director and head of retail at Jones Lang LaSalle.

“It goes from strength to strength here. In the last recession, the challenge for some of the lux retailers wasn’t so much lack of people buying, is was lack of product in their shops for people to purchase [after the retailers] decided to slow down production of some of their items.

“The lesson they learnt there was – during a recession, things don’t really slow down that much.”

British brand Burberry said in October the Middle East had emerged as one of its strongest markets, helping to boost global sales by 30 percent.

The company opened five regional stores in 2011, as it sought to cushion itself against a possible sales slump in developed markets.

French beauty brand Estee Lauder said in August it expected strong growth to continue in emerging markets such as the Middle East.

“Despite the year’s turmoil in the [region], our sales there rose more than 30 percent as we rolled out more locally relevant products and services,” the cosmetics maker said.

Analysts said the region’s strong luxury sales were underpinned by high disposable income, an array of top-end malls and a steady flow of tourists. The Gulf particularly has attracted a rising number of Chinese visitors, ranked as the world’s No.2 luxury customers behind Americans, according to consultancy Bain & Co.

In Dubai, the Gulf’s trade and tourism hub, more than 150,000 Chinese tourists were recorded in 2010 - a 41 percent rise on the previous year’s figures.

“Luxury remains a growing market in the Middle East and GCC region, with substantial spending power, strong consumption habits and a consumer confidence increase,” said Fadi Jabbour, COO of retail at Chalhoub Group, the franchise holder for brands Louis Vuitton and Christian Dior.

“At a group regional level, our sales forecast for 2011 was 11 percent growth, but we started with a very strong beginning of the year and expect to end at around 15 percent.”

Dubai is the second-most attractive emerging market for retailers after China, in part because of high disposable income. Retail accounts for 30 percent of gross domestic product in the emirate, home to about 40 shopping malls, Standard Chartered Bank estimates.

Saudi Arabia and the UAE were ranked among the top 10 countries in the world in terms of consumer confidence in the third quarter of this year, Nielsen said on Sunday.

According to The Nielsen Global Consumer Confidence Index, India topped the global list with Saudi Arabia second and the UAE in seventh position.

“I think the upscale business has been very strong the last few years and [particularly in] the first half of this year,” said Michael Gould, CEO of Bloomingdale’s Dubai.